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I want to start freelancing in Germany, and my first client is a UK based company. What confuses me is that I don't know if I should charge VAT or not. Since it's my start, I had no freelance income before, so I'm not sure whether the 17,500 rule applies to me. The client says that I don't need to charge VAT.

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Also working (as software developer) for a company in UK for about 10 months now. Taxes are "reverse charged" so you need both tax ids (from you and your client) on your invoice, and they are responsible to pay any taxes.

Only applies for services!

The supply of services between businesses(B2B services) is in principle taxed at the customer's place of establishment, [...]

Source

To be sure if this applies to your case talk to your tax accountant!

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I did some research and found the following from German-British Chamber of Commerce:

Intra-EC supplies of goods are exempt from VAT in Germany when they are made to a taxable person in another EU member state, who will account for the VAT on acquisition. Suppliers must show their German VAT identification number (this starts with the abbreviation DE and is followed by 9 digits) and the valid VAT identification number of the customer (this starts with the abbreviation of the country of destination) on their sales invoice. Furthermore, suppliers should inform their customers of the intra-EC supply and the exemption from German VAT

  • I confirm that Intra-EC rule, you don't charge the VAT and make a reference to the Council Directive 2008/8/EC, Article 44 instead. Your invoice needs to show the company's VAT number, and the applicable VAT rate. – Harry Cover Sep 23 '15 at 9:24
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Keep in mind there is a difference in Intracommunity VAT for services and goods, and between B2B and B2C. In this case I assume it's a service and B2B.

For services, assuming you are not established in UK nor do you have a UK VAT number, you put both your VAT numbers on the invoice but DO NOT charge VAT. The customer will need to pay VAT himself in the UK. This is known as the reverse charge mechanism.

See: http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/vat_on_services/index_en.htm (example 19 in the list should apply to you)

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As the money comes into Germany, you have to charge VAT. He probably doesn't want to pay VAT. I made a logo for a UK based company and I had to charge VAT too.

Das deutsche Steuerrecht kennt das so genannte „Welteinkünfteprinzip“. Demnach sind sämtliche (weltweiten) Einkünfte eines deutschen Staatsbürgers mit Wohnsitz oder gewöhnlichem Aufenthalt im Inland einkommensteuerpflichtig.

https://www.gulp.de/knowledge-base/recht-und-steuern/der-freiberufler-das-ausland-und-die-umsatzsteuer.html

This means that you have to charge VAT as you want to pay VAT to the state. As long as you live in Germany, all income is taxable as though it were from Germany1

1: Welteinkünfte Prinzip, "World income principle".

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    Hi Erikkli, welcome to Freelancing.SE! For this answer to be useful, can you cite a resource that explains when to charge VAT and when not to? This post got flagged for being low quality, and it may be removed if it's not improved. Use the edit link to edit the post with more information. If you need help, drop by Freelancing Chat or Freelancing Meta, and we'd be happy to help you make this a better answer. – Canadian Luke REINSTATE MONICA Aug 19 '15 at 16:39
  • This no more applies to intra-community sales. – Harry Cover Sep 23 '15 at 9:25

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